Godrej group locks its future, crafts succession plan

The objective behind the transformation of Adi, 73, from manager to mentor was to give the next generation a first-hand experience at handling bigger responsibilities.When Adi Godrej, chairman of the $4.1 billion Godrej group, began to helm lobby group CII about three years ago, the role was tailor-made for a well-designed succession plan. His busy one year schedule at CII kept him out of a managerial role at the chemicals-to-FMCG-properties diversified group and gave room for children Tanya, Nisa and Pirojsha to prove their mettle.

"My father very gracefully let us become the drivers of the group's future," says Nisa Godrej, the youngest of Adi's children.

Nisa Godrej, 38, who initially focussed on the transformation of Godrej Agrovet, a diversified agribusiness company, took on an operational role. She is now overseeing innovation, strategy and HR at Godrej Industries Limited and Associate Companies (GILAC), one of the holding companies of Godrej that has significant interests in several businesses of the group. Pirojsha Godrej, CEO of Godrej Properties, which develops residential, commercial and township projects, was until then managing only the properties business. He has since also been closely involved in decisions regarding group finance deals. Tanya Godrej, the eldest scion, had long overseen the group's branding. But she took on a more operational role in Nature's Basket as executive director of the gourmet retail arm when Adi took on the CII job.

The objective behind the transformation of Adi, 73, from manager to mentor was to give the next generation a first-hand experience at handling bigger responsibilities. Godrej Senior was adamant that if family members were not up to the task of handling the business capably as professionals, they should remain shareholders. Three years since that decision, the move has paid off. All the three Godrej scions have earned their stripes. They are now in charge of their respective roles, working with a team of senior professionals, with clear responsibilities and accountability.

Says Vivek Gambhir, CEO of Godrej Consumer Products Ltd (GCPL), the flagship company of the group, " Adi is now consciously focusing more on asking the right questions, rather than necessarily trying to provide all the answers. "He is also encouraging the management teams to experiment more".

That is from an operational point of view. In terms of earnings too, the scions seem to have delivered. Revenues of GCPL, in which GILAC has a major interest, has grown by 34% and net profits are up 32% since Nisa assumed bigger responsibilities. GCPL is also wooing new categories of customers. "Some of our brands are pushing the envelope in terms of our target consumers - these are premium brands targeting segments that we have not traditionally served before," says Gambhir.

Likewise, Sales of Godrej Properties have risen 33% and net profit 25% since Pirojsha took charge in 2012. Nature's basket, the gourmet food retailing business set up in 2005 and handled by Tanya Godrej is scaling up to become the first gourmet retailer with a pan-India presence. It has 33 premium stores at high street locations in major markets and an online presence in many cities.

Smooth Transition One key reason why the succession plan succeeded was it was smooth and subtle, according to Godrej insiders. Each of the Godrej scions identified their individual strengths and took on roles wherein they would collaborate with non-family professionals. "What you see today in the group is based on their (his children's) thinking," says Adi Godrej. "Over the last decade, they have both set the strategy and put the people in place to deliver results."

Under the next generation's watch, Godrej is pressing ahead with an ambitious growth plan called Vision 2020. The group, according to the plan, aims to grow 10 times in 10 years.

Nisa says her father has been happy to hand over the reins — but based on performance. "Even when he has disagreed with us, he has said it is your decision. " Tanya says while her father's operational involvement has significantly reduced, he is always available for support and advice. "He is still our anchor." The children have so far revelled at the bigger responsibilities.

Nisa proved herself by turning around Godrej Agrovet, helping the company make operational profits in two and a half years. She turned around Godrej Agrovet, a company that sells animal feeds and manages palm oil plantations. It sold its rural retail business Aadhaar to the Future Group. She bet on young talent, promoting Balaram Yadav, then the head of chicken business, as managing director of Agrovet.

The Nature's Basket business, which was part of Agrovet, was also transferred to group company Godrej Industries. The losses in the business dropped and profits made was ploughed back into the core business, animal feed, agri input and oil palm plantation business.

Nisa then helped create a strategy cell for the group. She also played a key role in devising the group's FMCG strategy, which included creating a five-year roadmap for GCPL, outlining categories in which GCPL needs to operate and instituting an M&A unit. Nisa has also been the driving force behind Godrej's efforts to attract and develop talent and make the group's culture more agile and innovative.

Pirojsha, meanwhile, has handled the financial aspect of the business, the domain of Adi Godrej. For the last one year, group insiders say Adi had been bringing Pirojsha to meetings to discuss financial matters. Pirojsha was also the first of the Godrej scions to be directly responsible for the profit and loss of a venture.

As MD and CEO of Godrej Properties, he has built a real estate company that has adopted the work culture and approach of an FMCG company. He has also cut some of the biggest real estate commercial deals. In a sluggish market, GPL announced the largest office space transaction valued at `1,480 crore with the sale of 4.35 lakh square feet of space at its under-construction Bandra-Kurla Complex to Abbott India. The company recently also sold 300 apartments at its residential project, The Trees, in Vikhroli, a Mumbai suburb.

Tanya Dubash has been instrumental in re-inventing the brand and logo to be contemporary to attract younger consumers across the globe. It also helped the group get better talent and ensure that all businesses should have digital focus.

Despite the ascent of the new generation, the fulcrum of the Godrej group operations — shared leadership with professionals — remains intact. Godrej's success in withstanding the uncertainties of the marketplace in recent years is attributed to the successful collaboration of family members with outsiders.

The core of senior leadership team at Godrej has been handpicked by the scions. Mohit Malhotra, executive director of Godrej Properties, was hired by Pirojsha. Nisa was instrumental in recruiting the senior team at Godrej Consumer Products, including Gambhir and Sunil Kataria, who is Business Head of India and SAARC. Tanya brought Mohit Khattar as Managing Director of Godrej Nature's Basket.

Balram Yadav, MD of Godrej Agrovet, says the group intelligently managed the transition. "They (the scions) have earned their position in the organisation. It's a good combination of family professionals and non-family professionals, neither imposing nor overwhelming."

Ireena Vittal, an independent director on board of GCPL, says what gave Adi Godrej the confidence to press ahead with the succession plan was that he knew the group was in able hands. "There is clarity on the owner's mandate while non-family professionals are accountable to performance. They balance giving guidance and having control."

Milind Sarwate, Founder of Increate Value Advisors LLP, says the merits of a promoter-owned and professionally-managed organisation are immense. "The Godrej children have different leadership styles, but have demonstrated their competence in their own ways."

The Godrej scions have also been open to scrutiny. When headhunting firm Egon Zehnder conducted an assessment for the leadership team, the trio too were assessed and benchmarked against talent in the market.

Road Ahead So far, the Godrej children have excelled in their roles. Now comes the harder part. For one, they have to fill the big shoes of Adi Godrej. For another, they have to steer the group through a challenging macroeconomic environment.

The promoter of a leading family owned business says family members need to have a fair degree of accommodation and influential skills with the maturity needed to lead an organisation with non- family professionals. "If the Godrej family succeeds at that, hats off to them".

Tanya, Nisa and Pirojsha will also have to identify new businesses to ride the next wave of growth. "Godrej will have to be more aggressive," says a top group official.